How To Write Covered Calls - An Ongoing Real Case Study! Message Board

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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!

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To: NateC who wrote (11338)	8/4/1999 12:57:00 PM
From: Hectorite	Read Replies (2) of 14162

Re: unless you have a better margin arrangement....you're no better off with the Naked Put [vs cc]...except for commissions that is. Well, yes you have to have the margin available to cover. But in your example the cc requires a 5k margin debt that you pay interest on and the np is 5k collateral that you earn interest on. Do some brokers really require actual cash in the margin account for writing? My broker only looks at margin headroom, that is, do I have enough buying power to withstand assignment. I use margin, but conservatively (keep debt to < 20% of buying power). Writing naked put is no problem even though I have zero cash. Further, the np premium lightens my margin debt. Now, the seduction is to go crazy with puts because you get the premium and you look at your positive balance and think you're really smart. That can unravel in a hurry. How would you like to be short puts on a basket of 'net stocks right now? ...."Dear, why are you under your desk in the fetal position?.."

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